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Microsoft Could Be Obsolete By 2017: Gartner Report

Not so long ago Microsoft (MSFT) was the undisputed king of technology, controlling about 90% of the market for operating systems. But as demand moved from desktops to laptops and then to tablets and smartphones, Microsoft lost its market reign to Google (GOOG) and Apple (AAPL).

A report released today by Gartner, the technology research and advisory firm, forecasts that by 2017 shipments of devices using Google’s Android operating system will dwarf shipments of Windows PCs and phones. Shipments of Apple iPhones and iPads will be almost at parity with devices powered by Microsoft.

“Microsoft could be completely irrelevant in three or four years if they can’t make headway in the smartphone or tablet market, where they’ve been struggling,” says The Daily Ticker's Henry Blodget.

The numbers are staggering. Gartner forecasts that by 2017 the number of tablets, mobile phones and ultramobile devices will total 2.7 billion units—almost 10 times the number of desktop and notebook PCs.

The stock market already reflects this shift in the device market. “The market is basically saying [Microsoft] is not a growth story. It's treated almost like a wasting asset, if you look at the current books and current cash flow,” says Michael Santoli, senior columnist at Yahoo! Finance.

Microsoft shares are down nearly 9% year-over-year while Google shares have rallied over 25%. While Apple's shares have fallen a startling 31% year-over-year, many would argue that these numbers aren't indicative of sales and cash flow but instead of leadership changes and more competition.

The challenge Microsoft faces now is how to stay relevant. Can it catch up in the tablet and smartphone market, where it’s been operating for years without much success, or must it try something completely different?

Santoli says Microsoft may need to acknowledge that it can’t “just survive based on its old architecture.” He says the company is trapped by its “near monopoly business that makes so much money” which doesn’t inspire much risk taking.